A couple of weeks ago Nasdaq OMX’s NLX was hit
by a series of rogue algos and the nascent exchange was forced
to cancel some trades which angered some traders.
This week it was ICE’s Liffe’s
turn when a technical fault meant its short-term interest rates
markets did not open leaving traders unable to execute on that
platform for over three hours.
Traders get understandably animated about these situations
as they are left either out of pocket or at best out in the
cold through no fault of their own. But it is easy to attack
the exchanges for these problems.
The fact of the matter is that there is no perfect solution
to an exchange outage. They tend to take place under unique
circumstances and exchanges (sensibly) do not prescribe a
strict approach in the event of a problem, rather they tend to
take them on a case by case basis.
This is understandably frustrating for clients, who want
certainty about their positions so they can adjust their
Yet uncertainty is unavoidable at least while the exchange
is working out what just happened and consulting with clients
over what should happen next.
The exchanges could definitely be more effective about
communicating with their customers in these situations.
One client told FOW he was on the phone to
Liffe’s customer services for most of Tuesday
morning, an experience only slightly relieved when the holding
music changed after an hour.
The simple fact is that these kinds of glitches
shouldn’t happen but they do and the exchanges
have the unenviable position of sitting at the heart of the
market so when an exchange goes down everyone knows about
We don’t tend to hear about it when a bank or
prop firm’s systems go down because no-one outside
of that firm would know, but exchanges do not have that
The Liffe glitch came just months before ICE is going to
start moving the London-based exchange to its technology
platform and off its legacy system, and the outage could have
fuelled calls for that to happen sooner rather than later.
The glitches will also have caught the attention of rivals
in the shape of CME Group which is looking to establish its CME
Europe exchange and the LSE Group which is working on a plan to
deliver a new futures trading unit perhaps as early as this
The technology aspects of a new exchange should not be
underestimated however. There are strong exchange system
suppliers around in the shape of Cinnober and the
LSE’s Millennium for example and they could get
you up and running in a few months.
But the greater challenge is linking up all the customers
and getting them tested and trading on the new system and that
is what takes the time, something the LSE will likely be
finding out in the coming weeks if it hasn’t
learned this already.
It is easy to attack the exchanges and they deserve it on
many occasions but everyone knows that technology is innately
unreliable and they should bare that in mind the next time and
exchange goes down, which will be next week or the week